Fifth District manufacturing activity strengthened in May, according to the most recent survey from the Richmond Fed. The composite index inched up from 17 in April to 18 in May, as all three component indexes — shipments, new orders, and employment — reflected growth. A majority of firms reported lengthening vendor lead times, as this index reached a record high, along with the backlog of orders index. Meanwhile, the index for raw materials inventories reached a record low. Overall, manufacturers reported improved business conditions.

Survey results indicated that many firms increased employment and wages in May. However, they struggled to find workers with the necessary skills, as this index dropped to its lowest value on record. Survey respondents expected workers to remain difficult to find and employment and wages to increase further in the next six months.

The average growth rates of both prices paid and prices received by survey participants rose in May, as growth of prices paid continued to outpace that of prices received. Respondents expected price growth to slow somewhat in the next year.